Survival of TV's fittest
NETWORKS' FUZZY FUTURE
NEW YORK — Click on "Frasier." The debonair good doctor is probably chuckling at one of his witty double-entendres. But behind the accompanying laugh track sit a lot of anxious executives.
They're contemplating the ever-steady defection of network viewers to cable, the brave new digital world and how, if at all, they'll manage to survive in it.
"At the moment, we survive because there are no other better alternatives," says CBS's vice president Marty Franks.
The only certainty in "Frasier's" extravagant and ratings-hungry world of network TV today is that it will look very different tomorrow.
Depending on the critic's perspective, the faltering media giants are either a dying breed that will go the way of "The Jack Benny Program," or they'll thrive as the future programming engines for the global media companies that have come to dominate America's entertainment industry - the Disneys and NewsCorps of the world.
Or a more likely scenario could emerge. If current negotiations with the cable industry are successful, the traditional networks could soon morph into pay cable channels that also just happen to have a free broadcast arm.
"If the networks think they're in the single-channel business rather than, in effect, the newsstand business that offers many choices, then they'll get in even more trouble," says media analyst Ken Auletta.
The networks, once known as the Big Three for their dominance of American television, are now the big four - ABC, CBS, NBC, and Fox. And they're struggling. Last year, NBC was the only profitable one. And without strong ratings from shows like "Frasier" and "ER," NBC could have found itself losing money like its competitors did.
Over the past quarter century, the competition from cable, direct broadcast satellite (DBS), and the two new "baby webs," the WB and UPN, have cut the big networks' combined viewing audience almost in half. At the same time, the cost of talent, sports, and high-quality programming has skyrocketed. NBC paid $4 million for each episode of "Frasier" - up from $500,000 when it first went on the air. For "ER" this fall, the network shelled out a record $13 million per episode.
Despite spending billions for new programming and aggressive promotions, the networks still weren't able to stem the steady loss of viewers. The Big Four's combined audience slipped another 6 percent last year, while the numbers watching basic cable jumped almost 10 percent.
Last summer, for the first time in history, the cable-viewing audience actually surpassed the networks' audience. (Although it was only for a week, and mostly because of pro wrestling.) But it was nonetheless a landmark, and the cable industry was quick to tout it as proof the traditional networks' days were numbered.
The multibillion-dollar government-mandated transition from analog to digital television begun this fall adds another note of uncertainty to the mix. Critical technical questions still must be decided and, more important, no one knows if enough people will want to shell out several thousand dollars for a new set to make the networks' billion-dollar investment pay off.
But against the odds, and many analysts' predictions, webs continue to maintain their dominance because of what the industry calls "eyeballs." They can still get more eyeballs to watch a single show than anyone else can.
On an average Thursday night, 20 million households tune into NBC's "ER." Cable's top-rated USA Network gets giddy if 2 million viewers watch. So each year advertisers, who are looking for the biggest bang for the buck, have proved willing to pay even more for a 30-second spot to reach even fewer viewers.
The multibillion-dollar question, says Mr. Franks, is: When does the networks' audience reach what is, in effect, the opposite of critical mass? "The scary part is, at what point does [it] get small enough ... that you start cutting back on the programming, at least on the free service?"
That's the key phrase - the "free service." The big networks are simply cogs in the wheels of huge media companies with a wide array of interests - from cable networks to production studios. If the ABC network loses money, it can be made up by the huge profits generated by the stations it owns, or by its parent company's cable holdings.
BUT in today's competitive media market, no entity that loses money survives for long. So the networks, which form the basis of the nation's free, over-the-air media, still need to find a way to turn around losses.
They've argued to Congress they should be able to own more TV stations than is currently permitted by law. That would allow them to generate more profits.
ABC, Fox, the WB, and UPN are part of larger companies that already own production studios. Thus, they can profit more if they air shows they already own. Not to be left behind, CBS and NBC are soon expected to hook up with large production studios.
But network executives also realize their advertising dollar dominance is precarious at best. So they're reportedly negotiating with the top cable companies to give each one their own dedicated pay channel. That would give them the same dual-income stream, subscriber fees, and advertisers they currently envy in their cable competitors.
But that move enrages public advocates. They say Congress gave the networks an estimated $70 billion worth of broadcast spectrum, precisely so they could make the transition to digital and compete with cable. Congress's goal, ultimately, is to save free, over-the-air broadcast TV for the 30 percent of Americans who don't want to pay for cable.
"I don't think they envisioned broadcasters turning into pay cable operators," says Jeffrey Chester of the Center for Media Education. "It's a bait and switch, they're being duplicitous - I think they're lying to the public."
But network executives contend that without additional income streams, free over the air network TV won't survive. The negotiations are expected to be complete by Thanksgiving.